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Accounting Scandal Sinks Spain's Pescanova

Wednesday, 17 Apr 2013 | 1:22 AM ET
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Spanish fishing firm Pescanova sank deeper into scandal on Tuesday as shareholder anger mounted over accounting failings and the chairman's undeclared sale of shares in the period leading up to insolvency proceedings.

Pescanova, a household name in Spain and one of the world's largest fishing groups, filed for insolvency on April 15 on at least 1.5 billion euros ($2 billion) of debt run up to fuel expansion before economic crisis hit its earnings.

More than a month beyond an official deadline, the fish-finger maker has yet to present audited 2012 accounts and on Monday revealed that Chairman Manuel Fernandez de Sousa had sold half of his 14.4 percent stake in the firm between December and February, shortly before starting work on the insolvency process last month.

Sousa said he sold the stake in order to lend cash back to the financially strained company, but he failed to notify his own board, or regulators, contrary to Spanish law. One of the company's largest shareholders complained that he had continued to exercise board influence based on the shares he sold.

Pescanova shares traded between 13.45 and 17.99 euros during the relevant period, and by selling a 7 percent stake Sousa could have raised at least 27 million euros, according to Reuters calculations.

In a stock market filing on Tuesday, Pescanova said Sousa lent 9.3 million euros to the company following the stake sale, at a 5 percent annual coupon.

His stake sale has further stoked the fury of shareholders, who have been trapped in the stock since trading was suspended on March 1 when the company failed to meet the deadline to present its 2012 results.

The stock, much of it held by retail investors, lost 58 percent of its value between Jan. 1 and the March 1 suspension following a 41 percent decline in 2012.

Aside from Sousa, the company's other main shareholders are Spanish brewery SA Damm with 6.18 percent, Luxembourg financial holding company Luxempart with 5.8 percent and UK-based Silicon Metals Holding with 5 percent.

"The chairman owns little more than we do and yet has had four board seats. Hiding his real stake has allowed him to take decisions that in our opinion were negative for the company," a Damm spokeswoman said.

At least three of the main shareholders have hired attorneys for advice over the matter, sources with direct knowledge of the situation said.

Uncertain Future

The Vigo-based company in Spain's northwestern Galicia region employs about 1,000 people locally and 10,000 across the world who catch, process and package fish on factory ships.

In 2005-2007, just before Spain's economy crashed, the company expanded, acquiring salmon farming and shrimp businesses from Chile to Florida.

One Spaniard punned on Twitter that the company had been doomed from the day it chose its name: "Pesca no va", or in English, "Fishing isn't working out."

Once a company files for voluntary insolvency in Spain, a judge must decide whether to accept the filing and appoint an independent administrator, a process that can take weeks or even months.

Pescanova finally handed over 2012 financial results documents to the Spanish stock market regulator on Monday, but they have not been signed off by board members or auditors.

A spokeswoman said the regulator was studying the documents before making them public and declined to comment on the immediate future of Sousa.

Pescanova first reported discrepancies in the books on March 12, a day after the market regulator said it would investigate the firm over possible market abuse.

The company suspended its auditors BDO earlier this month and has hired KPMG to carry out a forensic analysis of its accounts.

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